2 December 2011

"Money talks and bullshit walks" goes the saying. Sir Frank Williams is quoted by BBC as having said "Pastor has proven he is not only quick but can also maintain a consistent and strong race pace..." Fair enough, some may say. However, it would have been interesting indeed to hear Williams' opinion regarding Maldonado had he not come to his team with a multimillion pound sponsorship deal from PDVSA. More interesting still would be to see whether Williams keeps Maldonado, in the event that sponsorship money from PDVSA suddenly dries. That's what we were expecting, following investigation into the deal, and questioning from Venezuelan Congressman Carlos Ramos. Alas is not going to happen. Por ahora...

In recent communication Congressman Ramos told me that he wasn't going to reply to Claire Williams' email, in which she claimed that all Williams deals with its partners were subject to confidentiality clauses that prevented from commenting in public about them, and therefore no copy of contract will be sent to Congressman Ramos, and no information about payments disbursed to date by PDVSA will be shared. Ms Williams' preposterous argument could have been easily tackled by Congressman Ramos. In fact, while jointly preparing the reply to Williams that will never be sent, Congressman Ramos mentioned articles 154, 222, 223 and 314 of Venezuela's Constitution, which invalidates any claim to confidentiality argued by Williams. Simply put, any contract entered into by PDVSA is subject to approval, first by its board, and then by Congress. The reason being, PDVSA is fully owned by the Venezuelan State, and its budget needs to be approved by its board and by its sole shareholder. PDVSA can not agree to confidentiality clauses. Period.

But someone must have called Congressman Ramos. Or worse, perhaps someone threatened him, or his family. Just after Sunday's Brazilian Grand Prix in Sao Paulo, I communicated with Congressman Ramos to ask when would he sign and send me reply letter for Williams. And this is what he said:

I can't be seen as an anti-sport Congressman... The fight is against corruption, I can't make it personal against Pastor... Chavistas are manipulating this... I am frontal against corruption but we need public support for this... In Venezuela we risk everything...

Enclosed the letter that Congressman Ramos would have sent to Williams F1, but didn't because of pressure, threats, political reasons, or all of the above.
Dear Ms Williams,

I thank you for your prompt reply to my communication, with respect to the contract between PDVSA and the Williams F1 Team.

Your reply, however, suggests that William F1 has not done sufficient due diligence on Venezuela’s legislation regarding public expenditure.

As you know, PDVSA is an oil conglomerate, fully owned by the Venezuelan State. Given that PDVSA is the largest contributor of fiscal revenues to the Venezuelan State, its budget needs to be approved by its board and its sole shareholder - the State, on a yearly basis. The amount, and general expenditure, of PDVSA's budget is, as a matter of law, public matter. Ergo, Venezuela's Congress receives, once a year, a detailed account of PDVSA's expenditure, for one very important reason: monies earned by PDVSA in the course of its natural business operations belong to and support the State.

Sponsoring a F1 racing team is most definitely not a priority expenditure for an entity that can derive NO commercial benefit from such capricious outlay. Bear in mind that PDVSA is not a commercial brand, and that it sells nothing to consumers with its brand - now painted in various places on your race cars. The financial situation of the Williams Formula 1 team is probably a matter of great concern to its owners, employees, and commercial sponsors. However, there is no acceptable explanation as per why 28 million Venezuelans have to foot the bill, to simply help Williams survive. I understand why you would take money from anyone, though it is impossible for me to explain, to my constituents and countrymen, why on earth we are wasting money on your team. That all of this is done by a government that calls itself socialist, a government which has destroyed much of the private sector in my country, and has demonised the practices of capitalism, is even more ironic and perplexing.

Article 154 of Venezuela's Constitution: “Treaties agreed to by the Republic must be approved by the National Assembly prior to their ratification by the President of the Republic, with the exception of those which seek to perform or perfect pre-existing obligations of the Republic, apply principles expressly recognised by the Republic, perform ordinary acts in international relations or exercise powers expressly vested by law in the National Executive.”

Article 222 of Venezuela's Constitution: “The National Assembly shall be empowered to exercise its control function by means of the following mechanisms: parliamentary questions, investigations, questions, authorisations and parliament's approvals as provided for in this Constitution and by law, and any other mechanism that may be established by laws and their associated Regulations. In exercising parliamentary control, the National Assembly shall have the power to make a finding of political liability on the part of public officials and call on Citizen Power to initiate the appropriate action to enforce such liability.”

Article 223 of Venezuela's Constitution: “The Assembly or its Committees shall have the power to conduct such investigations as they may deem appropriate in matters within their competence, in accordance with the Regulations. All public officials are obligated, subject to the penalties established by law, to appear before such Committees and provide the same with any information and documents they may require in order to carry out their functions. Private citizens are also subject to this obligation, without prejudice to the rights and guarantees embodied in this Constitution.”

Article 314 of Venezuela's Constitution: "No expense of any kind shall be disbursed unless the same has been provided for in the budget law. Additional budget credit items may be ordered to cover essential unforeseen expenses or items that had not been adequately funded, only if the treasury has resources to cover the expenditure concerned; this shall be done only following a vote in favor by the Cabinet of Ministers and authorisation by the National Assembly, or in its absence, by the Delegated Committee."

The Venezuelan Congress was not informed, according to law, of the sponsorship contract between Williams F1 Team and PDVSA. Neither in 2010, nor in 2011, was the Venezuelan Congress informed by PDVSA of such expenditure within its budget. This is clearly our problem, as it further underlines the institutional collapse of our society. The loss of independence of the Legislative Branch, and the repeated violation of the law on the part of the Executive Branch, are the hallmarks of the so called “Bolivarian Revolution” you have so joyfully tied your team’s future to.

Therefore, I can not, and will not, accept your argument of confidentiality. What we would expect from any and all counter-parties to a public contract in Venezuela, is that they would seek, and demand, that all legal steps be cleared, and maximum transparency be ensured. Your failure to demand this from PDVSA, coupled with your unwillingness to facilitate the work of the National Assembly, makes Williams F1 Team complicit of unauthorised spending, and so from this moment on that is exactly they way I intend to treat Williams F1 Team, unless, of course, you change your absurd position and start collaborating.

Until proven otherwise, we will continue to have the suspicion that irregular payments are an integral part of this ruinous contract, as they have become the norm in almost all public contracts signed by the Chavez administration. Rest assured that the contract between Williams F1 Team and PDVSA will not remain confidential, we will not stop investigating this matter, and we will seek any and all means to terminate this contract. Equally, we will ensure that Venezuelan public monies no longer get wasted in such fickle and unproductive sponsorship.

To conclude, I would like to respectfully request that you reconsider your position and manner of replies, while I reiterate my request for: 1) a copy of the original contract; 2) monies disbursed to date by PDVSA; 3) evidence of payments to date by PDVSA; and I add 4) the names of all PDVSA or Venezuelan government officials that have obtained from, or through, Williams F1 Team, VIP treatment and box passes for races in the 2011 F1 season.

30 November 2011

*UPDATE at bottom. Lately, information coming out of Venezuela confirms that officials from the Hugo Chavez regime are totally unaccountable, above the law for all practical purposes. It sort of started when Congressman Carlos Ramos revealed there was a $29 billion fiscal hole in FONDEN, which is basically an out-of-budget fund that Hugo Chavez uses with absolute discretion to fund his pet projects and global revolution. In what has become known as the FONDEN papers, fellow blogger Miguel Octavio has delved more and more into the details of the dodgy fund.

In the meantime we have been treated to information about much smaller, but equally scandalous, expenditure. For example, a contract to provide to the Chavez regime electronic IDs, worth some $40 million, between Gemalto, a French public company with ADRs traded over in the USA, and a totally unknown Cuban briefcase-company called ALBET, which is meant to be some sort of subsidiary of Cuba's "university of technology" UCI. In this respect, Congressman Ramos also picked up the story, and decided to investigate a little.

Then, there's the sponsorship contract between PDVSA and Williams F1 team. In this instance, the amounts are believed to be between £110.5 million and £154.7 million (over 5 years). Again we find Congressman Ramos -it seems he is about the only elected official in Venezuela concerned about corruption- questioning the legality of this contract.

More recently though, copy of contract between China and Venezuela -to increase amount of a fund aptly called Chinese fund- has also been leaked. As Miguel reports, if what's stated in the documents is to be taken at face value, Venezuela, or rather Hugo Chavez acting unilaterally and without Congress' approval, wants to borrow $116 billion from China. In Miguel's own words:

The Republic borrows US$ 20.8 billion from the Chinese. PDVSA “pays” for this loan to the tune of US$ 15.7 billion per year, clearly an inordinate amount of money for the loan received. The Chinese collect interest and capital and any “excess”, of which there is a lot, returns to the Government, not to PDVSA, via parallel funds, which bypass the controls and approvals of Venezuelan Laws.

It's hundreds of millions here, thousands of billions there, maddening figures. Had these amounts of public money been put to legally intended use, Venezuelans, all 26 million of them, would most definitely be laughing any mention of crisis or capitalism failure. For it must be borne in mind: all these borrowing and spending without oversight, circumventing laws and Congress through dodgy funds and paying mechanisms, comes on the back of the highest ever windfall of oil income in the history of Venezuela.

The above excluding commitments entered into with the Chinese fund as referred above, and in addition to the nearly $2,000 billion estimated GDP since 1999. Some estimates put the combined budget of the Chavez period at about $1,000 billion.

Venezuela has become so corrupted, since Hugo Chavez's ascent to power, that it seems normal now that Nigerian-style scams, whereby officials documents and signatures are forged, are popping in the most unexpected places.

The worrying thing though, is that corruption does not end in Venezuela. Chinese, Russian, Belorussian, Iranian, Cuban, Nicaraguan, Bolivian, Ecuadorian, Colombian, Brazilian, Argentinean, and American authorities are happy to look the over way, so long as deals with the Venezuelan caudillo worths millions or billions can be had. But European countries, such as Spain, Italy, France, Germany and the UK are just as keen, perhaps even keener considering Europe's pathetic economic outlook, to look the other way, violate own anti corruption legislation, and enter into contracts that can't stand a minimum of scrutiny. This behaviour is generalised and widespread in both public and private sectors.

Venezuela is seen, as Libya used to be seen. Chavez is perceived, as Gadaffi used to be. Mad dog and all, there's tremendous potential to make a few billions quickly. And Chavez, in his diminishing existence, is eager to mortgage the future of Venezuela. The sad thing for us is that those who are meant to have higher moral principles, are just as corrupt and corruptible as chavistas.

*UPDATE: Miguel writes in with new debt figures: Venezuela's total debt has gone from $39.5 billion in 2000, to $104.5 billion in 2011.

The president of the BCV, Nelson Merentes, has denied having signed any document to that effect [link]. If Merentes' denial is to be taken at face value, it remains to be seen what legal actions will he, the BCV, and the government of Venezuela undertake, to prosecute Kellmar Ltd and Tony Caplin, for forgery of documents and signatures of Venezuelan government officials, in what could be a rather elaborate scam.

20 November 2011

Daniel writes in to say that I should provide a bit of an explanation for why this should be a scandal. I guess that the reason would be that it is simply not normal for a Central Bank, to transfer free and clear, ownership of a sovereign bond, worth $2 billion, to a recently formed limited company with a share capital of £2,000, managed by an individual (Tony Caplin) who appears as inactive in the Financial Services Authority register.

[Read UPDATE] Some context of actors provided to facilitate further investigations in respective jurisdictions.

Anthony Lindsay Caplin: a.k.a. Tony Caplin [link]. Former Chief Operating Officer of the Conservative Party [link]. Formerly with Panmure Gordon [link]. Director of Kellmar Ltd since 29 March 2011 [link]. Current Chairman of North West London Hospitals NHS Trust [link]. Current member of the Medical Research Council [link]. Current Commissioner of the Public Works Loan Board [link]. Currently inactive -as individual AXC01538 - Anthony Lindsay Caplin- according to the Financial Services Authority register [link].

Ramon Carpio Carvajal: Vice President of International Operations of BCV [link].

16 November 2011

Congressman Carlos Ramos is now turning his attention to Frank Williams' F1 team. PDVSA, the Venezuelan oil State conglomerate, is sponsoring the Williams F1 team. No one in Venezuela -apart from a handful of chavistas- knows how many millions have PDVSA promised and disbursed to Williams F1 team. In any case, according to Venezuelan legislation, no public monies can be committed to any such projects without the approval of the Venezuelan Congress. Neither Hugo Chavez, nor PDVSA, can unilaterally spend public monies without oversight or approval. Therefore the contract between PDVSA and Frank Williams F1 team may well be illegal, as there's no record of the contract ever having been discussed, or approved, by people's representatives in Venezuela's Congress. We shall see whether Williams F1 team replies now, to an official request for a copy of the contract for an ongoing investigation in Venezuela's Congress.

It is evident that this failure / refusal to answer a set of simple questions by whoever is in charge of PR and communications for Gemalto, it would appear to be Ms Marand, is indicative that Gemalto could have something to hide. Given that the company is registered in France and Holland, and the fact that it is a public company, it will be interesting to see whether their alleged operations and earnings in Venezuela, through a fully owned subsidiary in Mexico, are legitimate and have been properly declared.

The picture tell a different story though. Considering that Chavez, who's been unable to keep any of the promises and declarations he has made in the last 12 years, is the sole source of the late announcement, one can only conclude that declaring himself free of cancer is just another baseless and inaccurate statement of the dictatorial caudillo, and just the contrary may be taking place.

25 September 2011

Yesterday Leopoldo Lopez announced that he will seek to win the opposition primaries, so that he can face Hugo Chavez in October 2012 presidential election. In my opinion, as I wrote earlier in Spanish, Leopoldo has become the king maker, and he definitely has the upper hand, if he plays his cards right. Regardless of what chavismo throws his way. Leopoldo has developed a political platform, that showed some rather impressive numbers in party primaries. He has travelled the country, a la Romulo Betancourt, in the last 2-3 years, and has established (I’ve been told) networks of local support pretty much nationwide. He sits, comfortably, 2nd, 3rd, in polls (not that Venezuelan pollsters can be trusted) despite the fact that he hasn’t held office since 2008.

What Leopoldo needs to do is pact with MUD, the opposition umbrella group of political parties, and throw his lot behind the eventual winner. Making the most of the fact that he still is in political limbo (Chavez's kangaroo courts will ultimately decide whether he can run), but with a binding decision of an international court blowing his sails, he should start campaigning. Ferociously. What are the chavistas going to do, forbid him from campaigning, from travelling up and down the country?

If he wins the primaries, which I doubt, Hugo Chavez loses in October 2012.

If he is not allowed to participate in the primaries, and throws his lot instead behind Henrique Capriles Radonsky, or Pablo Perez , or Maria Corina Machado, or, even turncoat Henri Falcon, Hugo Chavez loses in October 2012.

If he is allowed to participate in the primaries, and comes 2nd, or 3rd, he still has a huge amount of votes, network, political platform and support to lend the winning candidate, Hugo Chavez loses in October 2012.

If, however, caudillo tendency gets the best of him, and he divides the oppo vote, Hugo Chavez will win in October 2012.

So whatever chavismo does, short of assassinating him, he has got, in my opinion, the power to decide who will be the next president of Venezuela.

6 September 2011

One can see them around. They are unmissable. For all their designer jeans, cool shirts, buckle shoes, limited-production watches, matte or white cars and bespoke perfumes, they can't fool anyone. A characteristic tackiness gives them away. Russians, Africans, above all Arabs, Latin-Americans, to a lesser extent Europeans, they are either the architects of tyranny, or its offsprings. Mayfair, Chelsea, Knightsbridge, Belgravia... London's most expensive areas are their playground. They come, and burn the ill acquired riches, the billions stollen from their countries, or made on illicit trades, as if there's no tomorrow. Some people speak about the "unacceptable face of Capitalism", in reference to the financial crisis that continues to affect our world, alas the very same critics of capitalism, and everyone else, are eager to welcome, with open arms, the characters above, and their money. They fall over themselves to accommodate every whim, in a nauseating spectacle solely worthy of contempt. Ask Frank Williams, Ken Livingstone, or some folks at LSE.

But then, one has to read stuff like this, regarding Britain's role in preventing development of Libya's alleged programme of WMD:

The British role in delivering this superb outcome which made the world a notably safer place was praised at the highest levels in Washington; it ranks among our greatest foreign policy successes since the end of the Cold War.

Honestly, I do not know where to begin. Still fresh in my memory are Colin Powell's infamous words about "mobile factories of WMD" in Iraq. One has to be a fanatic war hawk willing to bomb the shit out of one's perceived enemies, or an incredible ignorant person, to come up with such arguments. For only an extremely ignorant first world person can really believe that a bunch of Middle Eastern fundamentalists living in tents in a dessert have the technical expertise and technological capacity to design, develop, and produce successfully advanced weapons that could potentially put at risk the safety of the Western world. More likely, as we saw on 9/11, the preferred weapons are rather more mundane, and much easier to acquire. The last time we saw a threat of nuclear war issued by a deranged tinpot dictator was the missile crisis in Cuba in 1962, and even that one depended on Russia.

Tyrants, the world over, are indeed a menace: for the disgraced citizens of the countries where they reach power, and, above all, for the commercial interests of first world nations. One only has to look at what's surfaced recently regarding weapons sales to Gaddafi. China is up to its neck in it, but so is Britain, and Russia, and were it not those three, it would have been France, the USA, Italy, Spain, or Brazil. There is no consideration whatsoever to the victims on the ground. When there are billions to be made, no one gives a toss about them. And this is what can be called "smart and effective", in the words of Charles Crawford, author of the article linked above. The "smart and effective" thing to do, is to prop the Gaddafis of our world with the most technologically advanced weaponry, so that they can carry on oppressing and killing to stay in power, but crucially, they can carry on doing business with the first world, they can continue snapping prime properties in N1, W1 and SWs, they can be the source of untold fortunes of 'respectable' businesses, and businessmen alike.

In an evidently Chamberlain-esque way, Mr Crawford thinks that engaging tyrants is the way forward, for such interactions between democracies and dictatorships would, sooner or later, permeate the minds of tyrants and, eventually, they will abandon their ways in favour of democratic tenets like rule of law, respect for human rights, etc. Such proposition is untenable. To advance the notion that a business relationship is going to change people that have no qualms in massacring their own is, erm, beyond stupid, is sheer insanity. But it reveals how utterly ignorant these diplomats of the first world really are. Chaps that have grown up in safe societies, are educated in the best schools with symmetrically perfect lawns, have never been forced to confront the realities of living with rampant crime, with totalitarianism, with poverty, these people are ill equipped to deal with the very real thugs that run some of our countries. One can only laugh at such disconnected naivete.

As a matter of fact, Gaddafi, Assad, Castro, Mugabe, Chavez... all of them are there, firmly entrenched in power, for there's plenty of Chevrons, BPs, Exxons, Mitsubishis, ENIs, Totals, BAEs, Vitols, Saabs, Gemaltos, etc, desperate to go into deals with them. There are also Tony Blairs, Gordon Browns and Alex Salmonds, and equally, David Camerons and Nicholas Sarkozis, 'advancing democracy', so that British and French businesses can carry on with their standard practices in the third world.

The world will undoubtedly be a better place without the mad dog. However, no freedom loving Libyan, Zimbabwean, Cuban or Venezuelan will dispute that our nations will be safer and freer without the sheer hypocrisy and greed of Western governments, officials, businesses and businessmen pretending to be cavaliers of freedom.

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000233
SIPDIS
ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MKACZMAREK
COMMERCE FOR 4332/MAC/WH/JLAO
NSC FOR DRESTREPO, RCRANDALL AND LROSSELLO
OPIC FOR BSIMONEN-MORENO
AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE
AMEMBASSY OTTAWA PASS TO AMCONSUL QUEBEC
AMEMBASSY BRIDGETOWN PASS TO AMEMBASSY GRENADA
E.O. 12958: DECL: 2020/02/26
TAGS: EPET, EINV, ENRG, ECON, VE
SUBJECT: VENEZUELA: PDVSA Director for Strategic Planning Alleges it
is Open for Dialogue with U.S.
REF: 10 CARACAS 155; 09 CARACAS 1593; 09 STATE 99343
CLASSIFIED BY: Darnall Steuart, Economic Counselor, DOS, Econ;
REASON: 1.4(B), (D)
1. (C) SUMMARY: Fadi Kabboul, a member of PDVSA\'s board of
directors, asserted PDVSA\'s openness to dialogue with the USG, and expressed interest in the US Geological Survey\'s survey on recoverable oil in the Orinoco Belt that effectively doubled Venezuela\'s estimated reserves, and the on-going debate regarding Venezuela\'s production numbers. He noted current Chinese difficulties in operating in Venezuela. He also shared that the Washington-based Venezuelan Energy Counselor had returned recently to Caracas to direct the planning staff of the newly formed Electricity Ministry. END SUMMARY.
2. (C) PETROLEUM RELATIONS: Petroleum AttachC) (PetAtt) spoke with
Fadi Kabboul (Director of PDVSA) on February 18 when he was
identified on the visa line by an alert Consular Officer. [NOTE:
This message should be read in the context of Refs A and B that
provide a counterbalance to Kabboul\'s forward leaning assessment of
the U.S. relationship and on Venezuela\'s production figures. END
NOTE] Kabboul shared that his brother George Kabboul, President of
PDVSA subsidiary PDV Marina, had been concerned following his
recent invitation to PetAtt to visit his office (Ref A) and had
contacted his brother to inquire whether he might be \"in trouble.\"
Fadi Kabboul told PetAtt that his door is \"always open,\" that he
\"manages the U.S. petroleum relationship,\" and that \"we should get
together.\" Kabboul then asked whether PetAtt remembered PDVSA
Executive Vice President Eulogio del Pino\'s verbal invitation to
PetAtt offered on the margins of the World Heavy Oil Congress in
November 2009 to call his office and arrange for a meeting. [NOTE:
Fadi Kabboul offered a revisionist view of history. He has never
offered a meeting or claimed to be \"in charge\" of the U.S.
petroleum relationship. Nor did del Pino offer PetAtt a meeting.
END NOTE] Kabboul also stated his understanding that Venezuelan
Ambassador to the U.S. Bernardo Alvarez was supposed to have a
discussion with the Ambassador concerning the expired U.S. -
Venezuelan MOU on Energy Cooperation. [NOTE: Following inquiries
from the Venezuelan Embassy and PDVSA directors in Caracas, Post
submitted a diplomatic note (Ref C) to the GBRV in September 2009
agreeing to discuss the GBRV interest in resurrecting the MOU. The
GBRV has not responded to the diplomatic note. END NOTE]
3. (C) Kabboul stated that he would travel to Washington, DC the
week of March 1 to participate in the Energy Council\'s private
meetings, including a Western Hemisphere Energy Roundtable on March
4. [NOTE: Subsequent to this meeting with Kabboul, the Ambassador
agreed to address this private gathering of state legislators. END
NOTE.] Kabboul said that Minister Ramirez instructed him to meet
with the U.S. Department of the Interior\'s U.S. Geological Survey
regarding a report it published in February titled \"An Estimate of
Recoverable Heavy Oil Resources of the Orinoco Oil Belt,
Venezuela.\" The technical report essentially doubled the estimate
of recoverable heavy oil in Venezuela\'s Orinoco belt. Kabboul
claimed he has a meeting scheduled with the principal drafter,
Christopher Schenk, of the report and is primarily interested in
discussing the USGS decision to use a recovery factor of 40% in the
report. [NOTE: Post contacted USGS and confirmed that it had not
been approached by the GBRV or PDVSA regarding a possible meeting
to discuss the report. USGS agreed to inform the Venezuela Desk if
the Venezuelan Embassy requests a meeting. END NOTE.] He added
that PDVSA is sending a technical delegation to visit Chevron\'s
Bakersfield production field to understand better how Chevron has
achieved a recovery rate of 70%. [NOTE: MENPET has used a 20%
recovery rate in its negotiations with the IOCs. END NOTE]
4. (C) OIL PRODUCTION: Kabboul claimed that MENPET\'s release of
petroleum export documentation to British auditing company
Inspectorate had settled the issue regarding PDVSA\'s production
levels. He expressed a belief that any secondary sources that do
not upwardly revise estimates of Venezuelan crude production are
acting out of political motives and refusing to recognize the
\"transparency\" the GBRV has brought to the issue. He said that
domestic consumption is only 540,000 b/d. [NOTE: The majority of
non-governmental estimates put Venezuelan domestic consumption
above 700,000 b/d. END NOTE]
5. (C) PDVSA ON CHINA AND RUSSIA: Kabboul stated that negotiations
with CNPC to form a mixed petroleum production company in the Junin
4 block of the Orinoco heavy oil belt had stalled and might be in
jeopardy, but that negotiations with the Russian consortium for a
project in Junin 6 were progressing. He claimed that the GBRV is
extremely upset with Chinese companies due to the discrepancy
between Chinese petroleum import statistics that suggest the PRC is
profiting from Venezuelan oil purchases by diverting the crude to
third markets and earning a sizable margin between the price the
Chinese companies pay the GBRV and the price they receive on the
open market for the same shipment. Kabboul intimated that tankers
had been diverted to the U.S., Africa, and elsewhere in Asia.
Furthermore, PDVSA had analyzed its crude sales to China and
determined that China had only paid $5/barrel of crude on a couple
of deals.
6. (C) CHEVRON AND CARABOBO: Kabboul stated that according to an
internal PDVSA study, Petroboscan (a PDVSA/Chevron mixed company)
is the most profitable petroleum mixed company in Venezuela. He
added that Chevron was the big winner in the Carabobo bid round and
that Chevron President for Africa and Latin America Ali Moshiri \"is
great.\" He expects Chevron and PDVSA will finalize a mixed company
agreement by the March 24 deadline announced by President Chavez.
7. (C) PETROLEUM COUNSELORS: Kabboul mentioned that Carlos
Figueredo, the Petroleum Counselor in the Venezuelan Embassy in
Washington, DC had returned to Caracas to take up a position as the
head of planning in the new Ministry for Electricity. Figueredo
has a long-standing close relationship with Electricity Minister
(and former PDVSA CEO) Ali RodrC-guez). Kabboul stated that he is
vetting potential replacements. [NOTE: Traditionally, the GBRV
nominates a senior PDVSA executive to serve as its Energy Counselor
in Washington, DC. Kabboul preceded Figueredo in that position.
END NOTE]
8. (C) COMMENT: Kabboul has proven to be a reliable interlocutor
over the last couple of months on basic issues, responding
privately to phone messages and e-mails. He has not demonstrated
an ability to engage honestly in conversations of substance, but
rather toes the party line. Offers of meetings with EmbOffs, while
the GBRV disregards the official USG response to requests for
dialogue on substantive energy issues with the Ambassador, are
disingenuous. END COMMENT.
DUDDY

1. (C) SUMMARY: A senior PDVSA executive who was forced into
retirement in March 2007 stated PDVSA exports 38 million
barrels of oil per month excluding crude from the former Faja
strategic associations. President Chavez ordered PDVSA to
stop exporting to the United States before the November
elections but was later talked out of it but he remains
intent on carrying this out. PDVSA is losing 7 billion USD
per year due to its need to import components for gasoline.
PDVSA is also losing 3 billion USD per year due to Cuban
state oil company CUPET\'s failure to pay for crude shipments
and an undetermined amount from fuel oil shipments to
Argentina. Shipments of fuel oil to China were suspended due
to the steep discount the Chinese demanded. A PDVSA director
told the executive PDVSA would be \"dead\" if the price of WTI
dropped to 37 USD. END SUMMARY

--------------------------------
THEY DON\'T KNOW WHAT IS GOING ON
--------------------------------
2. (C) Petroleum Attache met on July 17 with a former senior
PDVSA executive who was forced into retirement in March 2007
to discuss the inner workings of PDVSA. The executive\'s last
position with the company was in trading. According to the
executive, PDVSA has consistently exported 38 million barrels
of crude oil per month. This figure does not include crude
exports from the former Faja strategic associations. Of this
amount, 900 to 925,000 barrels per day goes to Citgo. The
supply contract with Citgo has a yearly quota and daily
figures fluctuate. For example, Citgo does not want to
receive any crude from PDVSA after the second week in
December due to the fact that it wants to run down its stocks
for tax purposes.

3. (C) According to the executive, PDVSA is selling most of
its production on the spot market \"at distress\". In other
words, the market knows that PDVSA has to sell its crude and
does not have the luxury of shopping around for the best
offer. The executive stated PDVSA was selling its crude at a \"distress of six\" (a discount of six USD per barrel). He
believed traders from major IOCs were colluding to lower the
price on PDVSA\'s crude. He stated the traders were able to
buy at a discount because they \"were helping\" PDVSA to place
its production. The executive stated PDVSA does not have any
trading strategy. When Petatt noted contacts have stated
PDVSA traders are young and inexperienced, the executive
stated PDVSA senior management consciously decided that it
did not want traders who knew what they were doing. One
reason for the decision was that senior PDVSA management did
not want traders who could figure out how senior management
was stealing from the company. In addition, the managers did
not want traders who had the financial acumen to steal from
PDVSA. The executive stated an experienced trader stole 20
million USD from PDVSA and deposited the funds in Panama.

4. (C) The executive also claimed during his tenure in
trading that he worked directly for President Chavez. He was
told on a number of actions to carry out trades that
originated with President Chavez. According to the
executive, President Chavez ordered PDVSA to stop exporting
crude to the United States in the run-up to elections in
November. The order was never carried out because someone
convinced Chavez that the idea was counterproductive for
Venezuela. The executive opined that now that Chavez has
the idea in his head he will eventually try to carry it out.

5. (C) When asked if contingency plans were drafted for a
cutoff of Venezuelan crude supplied to the States, the
executive laughed derisively and replied no plans were in
place and that the senior management of PDVSA had no idea
what it was doing. He repeatedly stated senior PDVSA
management was not sure what PDVSA\'s actual production
numbers were. He also claimed that they were unaware of how
much money PDVSA was actually earning. He later amended his
comments and said that Eudomario Carruyo, a PDVSA director
and the company\'s de facto CFO, knew exactly how much money
PDVSA was generating and where the funds were flowing.

----------------------------------
GASOLINE COMPONENTS AND LUBRICANTS
----------------------------------
6. (C) The executive stated PDVSA is currently importing
125,000 barrels of gasoline components per day due to
problems with its own refineries. At current market prices,
the executive estimated that the imports were costing PDVSA
approximately 4 billion USD per year. (COMMENT: The
executive\'s statements concerning the importation of gasoline
components gibes with what we reported in Reftel A. END
COMMENT)

7. (C) He also stated PDVSA has been importing base
lubricants due to an inability to secure the crudes it needed
to manufacture lubricants at its own refineries. The
executive stated PDVSA used to import Basra crude to
manufacture lubricants. When senior management decided Basra
crude was too expensive, it ordered the executive to secure a
mix of Maya and Isthmus crudes. The executive complained
that use of the mix did not make sense commercially but was
over-ruled by his superiors. Unfortunately for PDVSA,
President Chavez then had a falling out with Mexican
President Vicente Fox and ordered PDVSA to quit purchasing
oil from the Mexicans. As a result, PDVSA was forced to
import base lubricants rather than manufacture them. The
executive did not give any figures on how much PDVSA is
losing due to the importation of lubricants.

------------------
CUBA AND ARGENTINA
------------------
8. (C) In addition to what PDVSA is losing on the importation
of gasoline components, the executive estimated it is losing
approximately 3 billion USD due to the failure of Cuba to pay
for the crude it is importing from Venezuela. The executive
stated Venezuela recently signed a new contract with Cuba for
the sale of crude to CUPET, the Cuban state oil company. He
stated he is not sure about the terms of the new contract and
added knowledge of the specific terms of the contract
appeared to be limited to very senior BRV officials.

9. (C) The executive stated that PDVSA began shipping fuel
oil to Argentina in 2004. He was told at that time that
PDVSA had to send oil to Argentina because the \"Argentines
were freezing to death\". The executive told his superiors
that PDVSA could not send Venezuelan fuel oil to Argentina
because its sulfur content was too high for Argentine plants.
In order to meet the commitment to supply Argentina with
fuel oil, PDVSA was forced to buy fuel oil from Mexico. The
executive stated PDVSA lost money on all of the Argentine
fuel oil shipments between 2004 and 2006. He was not clear
if PDVSA has shipped or will ship fuel oil this year.

---------------------
PACIFIC RIM AND CHINA
---------------------
10. (C) The executive also stated that PDVSA was ordered to
adopt a Pacific Rim strategy in 2004. He complained that
PDVSA could never make money in the Pacific Rim due to the
nature of the market. According to the executive, the market
is composed of two parts: California/the West Coast of the
United States and the Pacific Rim in Asia. The executive
stated the Middle Eastern producers, particularly Saudi
Arabia had a lock on the Asian market and had long term
supply contracts. He said Saudi Arabia would never allow
PDVSA to break its hold on the Asian markets and has used
PDVSA\'s attempts to break into the market as opportunities to
steal market share on the Eastern Coast market of the United
States.

11. (C) The executive also claimed PDVSA was no longer
shipping oil to China despite public claims to the contrary. He stated the Chinese were buying fuel oil at \"a distress of 20\". As a result, PDVSA could not supply the Chinese at those terms without a significant loss. PDVSA attempted to negotiate a new deal with the Chinese but was only able to reduce the distress to 18. As a result, it halted shipments
to China. (COMMENT: A senior CNPC executive told Petatt that
her company was receiving a discount on oil purchases from
PDVSA. She did not specify the amount of the discount. It
was our understanding that PDVSA is still shipping crude to
China but we base this on implications from CNPC officials\'
comments rather than on hard evidence. END COMMENT).

----
IRAN
----
12. (C) According to the executive, PDVSA has made two
gasoline shipments to Iran. The last shipment occurred in
February 2007. In one case, PDVSA was forced to use one of
its own coastal tankers to carry the gasoline to Iran. The
executive stated the tanker was old and in very poor shape.
Since the tanker was not supposed to leave Venezuelan coastal
waters, insurance would not have covered it if an accident
had occurred on the high seas. The executive estimated that
it would take a Panamax class tanker approximately 80 days to
make a round trip to Iran. He estimated that it would have
taken the PDVSA vessel considerably longer due to its
condition. He stated the vessel was supposed to carry
additives on its return trip.

-----------------------
WHERE IS PDVSA\'S MONEY?
-----------------------
13. (C) The executive claimed Carruyo told him in November
at a luncheon that PDVSA would be \"dead\" if the price of WTI
reached 37 USD per barrel. He said he personally believes
the danger point for PDVSA is a higher WTI price due to
PDVSA\'s declining production and management problems.
However, he declined to give a specific price.

14. (C) The executive also said PDVSA was instructed to
remove its funds from U.S. banks several years ago. He
claimed Carruyo approached him and asked him for suggestions
on which European banks to use. The executive was surprised
by the request but recommended Dresdner Bank AG and Deutsche
Bank. Carruyo then asked if he thought Barclays Bank was
another candidate and the executive replied no.

15. (C) The executive also stated he was grateful to Carruyo
because he is a PDVSA pensioner. He stated Carruyo moved the
9 billion USD PDVSA pension fund to a series of European
banks several years ago in order to \"hide the money from
Chavez\".

-------
COMMENT
-------
16. (C) Although we have little or no way of confirming the
executive\'s claims, we note that they are in line with many
of the things that we have heard from other contacts and
reported in the past (Reftel B). We believe that his claim
that Chavez is contemplating the suspension of crude exports
to the United States should be taken seriously.

13 August 2011

I was sitting on the starboard side of a P & O ferry, between Dover and Calais, minding my own business, enjoying the sun and the wind of the English Channel, admiring the seamless flow of people and goods, seeing the white cliffs of Dover disappearing in the distance, thinking how well the whole system works, when a drunken Pole sat right next to me. The conversation went somewhat like this:

- Pole: how're you travelling, coach or car?
- Me: car.
- Pole: I'm travelling back home to Poland, in coach, 15 hours, it sucks...
- Me: I can imagine...
- Pole: so where are you going?
- Me: off to Normandy with some friends and family...
- Pole: where are you from?
- Me: Venezuela.
- Pole: Venezuela? Isn't that where Chavez comes from?
- Me: yes.
- Pole: that motherfucker... He kept saying that he built a health system worthy of its name for the first time in Venezuela, and when he gets sick, he's off to Cuba? What the fuck is that all about?
- Me: brother, you got the nail in the head...

Needless to say that the Pole made my day. For there was a time when Europeans, in general, spoke wonderfully about Chavez. Now, even drunken Poles, employed in the construction industry, with little education, are able to see through the chavista bullshit.

5 August 2011

Readers of this blog will surely remember the exchanges I have had with Noam Chomsky in the past. The 'world's foremost intellectual' came out of his cave with a letter, published in the newspaper he accused recently of "extremely dishonesty", read The Guardian.

How utterly unhinged Chomsky and his fellow apologists of chavista totalitarianism have to be, to request publication of a letter, based on unsubstantiated propaganda, in the very media they all dismissed as "dishonest"? The encouraging news is to see that the list of personalities imbeciles decrying 'human rights abuses' in Venezuela is shrinking: taking out known propagandists on Chavez's payroll (Hat tip NYT), they could hardly get over 20 signatures.

UPDATE: while rather uncommon of me to be linking to Labourlist.org, here's a very refreshing view from Rob Marchant, about how dictatorial thugs like Chavez manage to get support from the most radical fringes of the Left. Fortunately that fringe of fanatics is ever more irrelevant, and is seeing as such. Is it any wonder that none of Chavez's 'political parties' has ever been admitted to the International Socialist?

30 July 2011

In another twist in the ongoing saga of Hugo Chavez ceding sovereign matters to Cuba, El Nacional reported on 17 July that the new electronic IDs will be handled by a branch of a Cuban "technology" university, called ALBET, which in turn has subcontracted Dutch multinational Gemalto's 100% owned Mexican subsidiary -to the tune of $40,500,000- for the provision of 6 million e-IDs. ALBET's contract with Venezuela dates from 2005, according to Spain's El Pais. More worrying still, Ramiro Valdés, one of communist Cuba most feared party apparatchiks, is meant to be behind the contract.

But Gemalto, that as a publicly traded Dutch company is the only party to this deal that has to operate according to some transparency rules, has refused to answer any of my requests for information. In fact, there's nothing in Gemalto's last three years annual reports indicative of a contract between its fully owned Mexican subsidiary and ALBET. The $40,500,000 that allegedly exchanged hands aren't reflected anywhere. Below, the emails that I have sent thus far.

My name is Alek Boyd, Venezuelan blogger based in London, who has called your office on a couple of occasions regarding an alleged contract between a Gemalto subsidiary (Mexico) and a Cuban agent for the provision of IDs to the government of my country. Your name was given to me by a kind secretary in your office in London (Vicky).

I should be most grateful if you could read the message below, and provide information as per who may be the correct person to contact regarding issues raised. Furthermore, I'd like to add to the questions below, the following:

- Why would a multinational, publicly traded company, like Gemalto, not contract their services directly with the Venezuelan government? Why use, instead, a dodgy Cuban intermediary?

El Nacional, which is one of Venezuela's leading newspapers, reported on 17 July [link], that Gemalto de Mexico had been contracted by a Cuban company called ALBET, to the tune of USD $40,500,000, for the provision of IDs to the government of Venezuela. The alleged contract between Gemalto de Mexico and ALBET can be read, in Spanish, following this link:

The contract is meant to have been signed on 20 August 2008. Given the amount of the contract, and the sensible nature of the services provided, one would be forgiven for thinking that Gemalto would boast about it in its annual reports. However, I could not find any indication in Gemalto's annual reports of 2008, 2009, or indeed 2010, about the contract between ALBET and Gemalto de Mexico, which is described in your reports as Gemalto's 100% owned subsidiary.

This of course raises a few issues, given that Gemalto is a publicly traded company. To be frank, we Venezuelans couldn't care less about how Gemalto conducts his business, where or how declares its income, where or how pays its taxes, etc. What we do care about is the fact that Gemalto de Mexico seems to have been subcontracted by a Cuban joint in violation to Venezuela's legislation, and, as a consequence, may have received, in case the contract is legit and has been acted upon, millions of dollars of Venezuelans tax payers' money illegally.

Yesterday I called your office here in London to ask for verifications. After a short explanation, a kind secretary, called Vicky, replied by saying that "someone senior would get back to me, either by phone or email." Alas, as of this hour, no one has.

Therefore, I should be most grateful if you could indicate the name, and contact details of a Gemalto representative that could answer a few questions about the issues raised above, namely:

1- Did Gemalto de Mexico, represented by Messrs. Arnaud Jean Loic and Martin Djunte Ghomsi, signed a contract with ALBET?

2- If it did, what due diligence was made by Gemalto de Mexico with regards to whether ALBET had the power to enter into contracts for the provision of IDs to the government of Venezuela?

3- If it did, how much has Gemalto de Mexico received to date (in USD), as per contractual clauses?

4- If it did, what has Gemalto de Mexico delivered, as per contractual clauses?

Cordially yours,

Alek Boyd

UPDATE, 2 August 2011: a comment by Rodrigo has pointed me in the direction of what he defines as common practice: i.e. European companies paying bribes to officials through dodgy intermediaries. That could be the reason why Gemalto did not enter into a contract directly with the Chavez regime. Rodrigo cites three Panamanian companies (Billingsley Global Corporation, Ferdell Business Inc., and Selbor International Inc.) involved in some inexplicable payments on a €46 million deal of Germany's Bundesdruckerei with Venezuela (reported here by German media). Ferdell and Selbor share the same directors (Thays Herrera de Salas, Mariela de Cristi, and Eligio Rodriguez).

But that's not the issue. Gemalto's ADR are traded in the US, and its shares are also traded in Paris' stock exchange. Perhaps it's time to blow the whistle with American and European authorities?

Alek Boyd created Vcrisis.com and started blogging about Venezuela in Oct. 2002. Since, he has worked as an independent researcher, reporter, lobbyist, civil and political rights activist, and has experience in strategic and media consulting throughout Latin America. In 2006, Alek became the first blogger ever to shadow a presidential candidate in Venezuela. In 2009 he gained a MA (merits) in Spanish American Studies (King's College London). Alek can be contracted to do due diligence on individuals and companies in Venezuela and LatAm. Contact: @alekboyd.

Most of the investigations I've published since 2002 are related to individuals and companies with suspect connections to Hugo Chavez's regime, whose actions would've gone unnoticed otherwise. Exposing the $2-trillion dictator is no easy task, and so donations are always welcome.